Business Model: Private Wire - Net Zero Go
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Business Model: Private Wire

In the private wire business model, a solar asset is directly connected to the point of offtake and electricity generated is used to satisfy site demand

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Provided by: Energy Systems Catapult

Part of: Unlocking clean energy in Greater Manchester (UCEGM)

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Business modelling Power purchase agreements (PPA) Solar PV
In the private wire business model, a solar asset is directly connected to the point of offtake and electricity generated is used to satisfy site demand. Surplus solar generation is exported to the power grid.
A private wire is sometimes referred to as a ‘Behind the Meter (BtM) PPA This model can be enacted by local authorities as follows:
  • Local authority designs, builds and commissions solar generation asset on/ near building.
  • Capital and operating costs are recovered through a PPA with a third-party offtaker (most likely a tenant in a local authority owned building but this does not always have to be the case).
  • The third-party offtaker pays for any grid imported electricity through their existing supply contract.
  • The local authority may generate additional revenue from surplus solar export.
  • This will require an additional export arrangement with a balancing responsible party.
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  • A private wire is where a generator connects directly to a building or site, replacing any power they would have imported
  • A private wire is not subject to the same regulation and charges (e.g. use of system or policy charges) that standard exported electricity would face
  • This is highly valuable for both parties depending on the cost of setting up the private wire:
    • For the off-taker, they will have to import electricity as normal when there is not any power available from the private wire
    • For the generator, anytime there is not sufficient demand from the off-taker, the excess power will be exported onto the grid which requires separate commercial

Key Benefits

Financial and CO2

  • Decrease in energy bills for off- taker
  • Uplift in price for generator
  • Reduces carbon emissions for off- taker through reduced import from grid

Other Benefits

  • Long-term price security for generator and off-taker
  • Local skills and jobs
  • Can be expanded with additional capacity at good site locations

Risks and Considerations

  • Complex to deliver
  • Requires suitable locations and demand close to generator
  • “Optimism bias” – can suffer from poor initial cost estimates and spiralling costs
  • Value from avoided system and policy costs likely to be removed in future
  • Very difficult to find sites of sufficient size next to an off- taker
  • Cost of setting up the private wire

Suitable for

  • Technology – primarily solar, storage could be included in future
  • Schemes with a large baseload which is guaranteed over time
  • Sufficient network and grid connection capacity, so that the off- taker does not incur any upgrade costs
  • Suitable land needs to be available in the area, where generation can be placed close to demand and create limited issues in terms of planning consent for the private wire

Contracts Required

  • Direct PPA – if the generator and off-taker are different parties
  • Contract with Electricity Supplier – off-taker contracts with electricity supplier for balance of electricity
  • DNO – Grid Connection Offer and agreement to be in place
  • Construction & Legal – construction contract for generation, installation and for “Private Wire”. Legal contracts to fulfil third party land rights and H&S
  • Operational – Operational contracts for running and maintenance of “Private Wire”

Contractual Considerations

  • Specifying the requirements for the private wire is a specialist skill and will require a proper engineering review of the proposed route to identify additional challenges
  • It is likely that the generator would be an exempt supplier under the Supply Licence Exemption Rules – but specialist advice on this should be sought by the project
  • Connection arrangements can become complex as the generator will generally not be allowed to connect to the grid other than at the off- taker’s site
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